System to Be Bucked?

The limitations imposed on U.S. dollar deposits in Mexican banks shall stand, says Ernesto Cordero, secretary of Mexico’s finance ministry. Cordero recently delivered this message to Juan Manuel Hernández Niebla, president of Coparmex, an organization that represents business interests. He had gone before Cordero to argue that the restrictions placed upon the use of the dollar in Mexican business transactions will severely impact all of Baja, California, and particularly Tijuana, where 90 percent of business transactions in the tourist sector are done in U.S. dollars.

According to the Wall Street Journal, “bank deposits, the payment of loans and services, as well as foreign exchange transactions [will be limited] to between $1500 and $7000 a month, depending on the profile of the client.”

According to Cordero, the new restrictions will not be modified because of pressure from the U.S. government to implement them, ostensibly to impede money-laundering. Hernández, arguing for business interests, said that Tijuana´s economy is dolarizado (dollar based) and has been for decades, thus the new regulations would impose an extreme hardship on Baja's monetary dynamic and economic health. Although Cordero agreed with the Coparmex president, the new regulations and limitations go into effect September 15.

Some local restaurant owners, upon being queried, were hostile to such measures; one said that he would accept dollars no matter what measures the Mexican government takes. Another business group, CANACINTRA, plans to take the issue to Mexico's president. "It's an absurd measure," said the CANACINTRA spokesman. “There are no words to express this anger.”

Comments

Absurd. The vast majority of Tijuanenses renting close to down town Tijuana (or really, in most affluent areas) still pay their rent in U.S. dollars. Almost all businesses in Tijuana not only accept U.S. dollars but prefer them. People are not going to stop this practice, which means the regional liquidity will dry up because people are now going to be holding dollars. It's also going to drive the exchange rate into fluctuation. Economically stupid decision.